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Introduction to Operations and
Supply Chain Management
Chapter 1
A New Business Environment
• Businesses try to break down
the “silos” that used to define
business functions.
A New Business Environment
 Technological progress is moving at a
tremendous rate
 There are many new products and services in
addition to old ones
 Rapid change is the norm
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1. Define Operations Management.
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Operations Management
 What is operations management?
 “The management of resources used to create
saleable products and services.”
 The management of an organization’s productive
resources or its production system, which converts
inputs into the organization’s products and services.
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Operations Management
 Operations Management – The planning,
scheduling, and control of the activities that
transform inputs into finished goods and
services.
© 2010 APICS Dictionary
Figure 1.1
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Manufacturing
 Tangible product
 Key decisions driven by physical
characteristics of the product:
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How is the product made?
How do we store it?
How do we move it?
Etc.
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Services
 Intangible Product or Service
 Location, Exchange, Storage, Physiological,
Information
 Key decisions:
 How much customer involvement?
 How much customization?
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Effectiveness vs. Efficiency
 Effectiveness – the ability to choose
appropriate goals and achieve them.
 Efficiency – the ability to make the best
use of available resources in the process of
achieving goals.
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2. Define Supply Chain.
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Supply Chain
 Supply Chain – A network of manufacturers
and service providers that work together to
create products or services needed by end
users.
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3. What are the components of a
Supply Chain?
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Supply Chains
Basic
Producer
Converters
Fabricators
Assemblers
Support Services
Transport
Storage
Finance, etc.
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Basic Producer – Mines, extracts or harvests natural resources
Converter – Refines natural resources
Fabricator – Converts refined materials into usable components
Assembler – Assembles components into finished products
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4. Define Supply Chain
Management.
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Supply Chain Management
 Supply Chain Management – The active
management of supply chain activities and
relationships in order to maximize customer
value and achieve a sustainable competitive
advantage.
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A Supply Chain Example
Figure 1.2
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Supply Chain Terminology
 Upstream – Activities positioned earlier in the supply
chain.
 Downstream – Activities positioned later in the
supply chain.
 First-tier supplier – A supplier that provides
products or services directly to a firm.
 Second-tier supplier – A supplier that provides
products or services to a first-tier supplier.
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Supply Chain Operations
Reference (SCOR) Model
© Supply-Chain Council, 2011
Figure 1.3
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5. What is the need of studying
operations and supply chain
management?
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Why study Operations and
Supply Chain Management?
 Every organization must make a product or a
service that someone values.
 Most organizations function as part of larger
supply chains.
 Organizations must carefully manage their
operations and supply chains in order to
prosper, and indeed, survive.
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6. What are the important reasons
for adopting Supply Chain
Management?
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Adopting SCM
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Increased competition
The impact of customers on suppliers
The impact of suppliers on customers
Technological advances
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6. What are the five components of
Supply Chain Management
(SCM)?
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Supply Chain Management (SCM)
Consists of:
 Planning activities
 Sourcing activities
 “Make,” or production, activities
 Delivery activities
 Return activities
© Supply-Chain Council, 2011
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Supply Chain Operations
Reference (SCOR) Model
© Supply-Chain Council, 2011
Figure 1.3
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8. Outline the historical
developments of operations
management.
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Historical Development of OM
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The Industrial Revolution
Post-civil war period
Scientific Management
Human Relations and Behavioralism
Operations Research
Service Revolution
Computer Revolution
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9. How has operations
management contributed to
society?
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Contributions to Society
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Higher standard of living
Better quality goods and services
Concern for the environment
Improved working conditions
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10. What are the three important
trends that are influencing
operations and supply chain
management?
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Important Trends
 Electronic commerce
 Reduces the costs and time associated with supply chain
relationships
 Increasing competition and globalization
 Fewer industries protected by geography
 Relationship management
 Competition between chains, not individual firms
 Trust and coordination
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11. What are the tangible resources
used to create value?
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Tangible Resources
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Inventory
Workforce
Capacity
Facilities
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12. What are the intangible
resources used to create value?
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Intangible Resources
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Customer relationships
Resource planning
Lean systems
Total Quality management (TQM)
Constraint management
Supply chain management
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Professional Organizations
 APICS – Association for Operations
Management
 ISM – Institute for Supply Management
 CSCMP – The Council of Supply Chain
Management Professionals
 ASQ – The American Society for Quality
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POM Extras
 Terrafugia Flying Car
 CBS Early Show – The Terrafugia Flying
Car Video
 The Next Big Future Flying Car
 Terrafugia Webpage
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